Turkish banks have retained the support of international lenders despite the latest political controversy that will see fresh municipal elections in Istanbul later this year.
Turkey’s decision to re-run the city’s municipal elections, which President Recep Tayyip Erdogan’s AKP party lost, led to a weakening of the lira.
However, that appears to have had a minimal impact on the appetite of international lenders, which continue to plough money into the Turkish borrowers. A survey by the Loan Market Association showed that across CEE and CIS, emerging market bankers saw the most opportunities for syndicated lending in Turkey, beating Poland and Russia.
Arvid Tuerkner, managing director for Turkey at the EBRD, said: “There isn’t a lot of [domestic] lending so the banks don’t have huge funding needs. Generally, we’re seeing smaller rollovers, but there’s no indication that the market won’t be happy to lend to them. The banks are still reasonably well capitalised.”
A loans banker at a European firm said: “It’s not ideal — no one wants to see another political back and forth in an already troubled market. But [Turkey’s] banks will be still be able to continue their international refinancings.
“If things continue to be rocky, maybe margins will widen again, but the [lender-borrower] relationships and ancillary business that Turkish banks guarantee are too big to walk away from.”
Offers oversubscribed
The currency crisis last August in which the lira weakened to TL6.95 to the dollar following a spat between US President Donald Trump and Erdogan caused a momentary pause on Turkish activity in capital markets.
But international lenders demonstrated their commitment during a crisis. Within a month of the catastrophe, Turkish banks had re-entered the syndicated loan market, refinancing billions of dollars of outstanding debt with international lenders.
Although borrowers, including Turkey’s largest bank, Ziraat Bank, received margins that were 25bp wider, all major bank loans were oversubscribed, demonstrating continued strong international demand for Turkish debt.
Penelope Smith, head of developing markets corporate loan origination at Commerzbank said: “Turkey has showed some recovery since last summer’s crisis. The Turkish banks repriced their semi-annual borrowings — they’re not back to the previous levels but there is some recovery as deal volumes remain strong.”
High levels of demand for Turkish bank loans in the secondary trading market are testament to the resilience of the banking system, despite the monetary and economic crisis.
Smith added: “Secondary trading in such issues initially stopped altogether, but after a few weeks it restarted. Trading of Turkish assets is one of the busiest sectors in the secondary trading market.”